#235 hedgefunds & derivatives

I read about hedgefunds and derivatives needing more regulations on US news.

However I do recall in February of 1995, the Barings Bank founded in 1762 in Britain was bankrupted by a rogue trader who was then posted to Singapore to manage its securities arm of the bank. He speculated on some derivatives contracts that left a $1.4 billion hole in Barings balance sheet that brought its demise — the merchant bank that once financed the Napoleonic Wars, Louisiana and Erie Canal and was Queen Elizabeth’s personal bank.

Why were these instruments still in the market since?

Why did those American financial institutions rationalise in support for such instruments that had brought the demise of a 233-year-old merchant bank in 1995?

Is this one reason that created the financial blackhole which cause this global economic meltdown?